Summer months are an ideal opportunity for students to earn extra money. In practice, they most often choose employment based on an agreement on work performed or an agreement on work activity. However, from next year, they will have to consider that the conditions for taxing temporary work will worsen.
When the gross monthly remuneration from the work agreement performed is 10,000 CZK or less and from the agreement on work activity is 3,999 CZK or less, no social or health insurance is paid from the remuneration.
Especially the low taxation of gross remuneration up to the limit is the main reason for the attractiveness of employment agreements. “Students working for multiple employers do not pay insurance from any agreement if the gross remuneration with each employer is within the limit because, in 2023, the limit is still being monitored separately for each employer,” adds Gabriela Ivanco, a tax advisor at Mazars.
Working students are entitled to the essential monthly tax credit for the taxpayer in the full scope of CZK 2,570 and a credit for a student for CZK 335. When working for multiple employers simultaneously, tax credits can only be applied to one of them.
“The currently prepared legislative changes, however, count on abolishing the tax credit for students from January 2024. Students will still apply for this credit during summer jobs this year,” adds Ivanco.
Students who earn money through temporary work only part of the year, especially during the summer months, and who pay withholding tax from their earnings will be entitled to a tax refund for the year 2023. This summer, they will pay more on withholding or deduction tax than their annual tax obligation. In the tax return, they will apply the credit for the taxpayer and the student in full annual scope, even though they were gainfully employed only for part of the year.
“To fill out the tax return, students will need confirmation of taxable income from all employers, including those for whom they worked based on employment agreements,” Ivanco warns.
The work agreement performed is prevalent among students. Some students work for three or four employers at the same time with a gross monthly remuneration of CZK 10,000 and do not pay anything for social and health insurance. However, if legislative changes pass, insurance will be deducted from all agreements if gross monthly remunerations exceed 40 percent of the average wage.
Therefore, working for two different employers with a gross remuneration of 10,000 CZK without paying insurance will be impossible. “Tax conditions for working students will worsen not only due to the abolition of the tax credit for students but also due to new limits for the creation of insurance participation in cumulative agreements on work performed,” Ivanco concludes.